If you’re old school (and I am), you’ll recognize the phrase that serves as the title to this post. It answers the question to the three most important factors in buying real estate – location, location, location. True enough, I’ve found it to be true in my own real estate investment decisions. Buy something in a BAD location and you’ll see what I mean. I made that mistake. Once. I bought a rental house in the worst area of Jackson, Mississippi. A word of advice – if you make the same mistake, don’t leave any tools in the home overnight.
But I digress. My current conundrum is quantifying an adjustment for location to the comparable sales used in the demonstration report I’m writing in partial fulfillment of the requirements for my MAI designation. The subject is an 8 unit apartment development at a top secret location in Kentucky. Top secret because of confidentiality requirements. Sure, I could tell you, but then….
Ideally, I would simply perform a multvariate linear regression analysis on the abundance of multifamily sales in my area. That’s the textbook answer. In every Appraisal Institute textbook, perfect scenarios are presented in which appraisers, knowledgable of every aspect of every sale are able to extract from the market the appropriate adjustment. That’s fine for teaching appraisal theory. For my money, the Appraisal Institute is the best thing going. Their educational program is challenging and insightful. But this is the real world. And believe me when I say that extracting an adjustment for location is, well, challenging.
But I’m up to the challenge. And I will get the job done. If you have any ideas…drop a line. Let’s talk. Ok, back to my spreadsheet.